Friday, April 13, 2007

Goldman Issues Report On Satellite Radio

April 13, 2007

Mark Wienkes of Goldman Sachs issued a report regarding the satellite radio sector.

Report Excerpts:

Slowing gross adds...growing churn.

We are lowering our 2007 subscriber estimates below company targets for Sirius owing to continued slower subscriber growth as retail demand weakens. Industry net additions first fell n a year-over-year basis in second-quarter 2006 and accelerated through the balance of 2006. We expect the full year 2007 net additions to decline again versus 2006 for both operators. Our estimates contemplate greater gross OEM net additions year over year versus fewer retail net adds set against a backdrop of increasing churn.

Valuations likely to remain under pressure.

Satellite radio fundamentals remain challenged and, in our view, will face speed bumps near term before entering a two- to three-year OEM-driven window of opportunity to solidify a position in consumer-supported media. With consensus forecasts still too high and merger uncertainty, we think XM’s and Sirius’ stock price will remain under pressure with increased risk to the downside - especially as many large investors sit out the binary merger situation.

Uncertainty of merger benefits and approval.

As we have stated, merging platforms could deliver significant operational, financial, and strategic benefits, but remains unlikely to pass muster with the FCC, DOJ, and investors under current conditions. Further, we question how much of the cited pro consumer benefits cannot be attained by simply playing nice.

Investment recomendations.

We still prefer XM as the better investment in the satellite radio space given its OEM alignment and lower cost structure set against a discount valuation relative to Sirius. That said, with a fixed exchange ratio tied to SIRI, we are not optimistic that the shares will appreciate, given our belief Sirius' fundamentals will deteriorate and disappoint in 2007 as XM’s did in 2006, with net add growth set to fall and churn rise.

Lowering price targets for XMSR and SIRI. Our 12-month price targets are now $12.75 for XMSR (Neutral), from $14, and $2.50 for SIRI (Sell), from $2.75.

Labels: goldman sachs, merger, sirius, xm

4/13/2007 10:04:00 AM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

5 Comments:

Is there anyone out there who thinks SIRI and XMSR will go higher? I feel like a feakin' idiot for holding these stocks for a 50% loss. The Steet.com and Goldman knock the stock down every time it starts to go up. I would like to know how much they are profitting every time they do it. I am so sick of the garbage associated with these stocks, I could vomit! I am a small shareholder with no ability to do anything about the games I feel are being played, it is a frustrating feeling that my only option seems to be to sell for a huge loss. I thought once sentment got so negative that a stock starts to bounce, how much more negative can it get?
By Anonymous, at April 13, 2007 11:07 AM

I feel the exact same way. Its like these nebulous forces come out of the wood works when ever their is some upward movement to bring it back down.
By Anonymous, at April 13, 2007 11:15 AM

There is no magic to this, and the key is being on the right side of the trade, or at least minimizing your risk to an acceptable level.

By example, the use of stops can protect you from losses, and can be used to preserve your gains.

People tend to be afraid that they will miss out on something if theyu are not in the equity when the "big news" arrives.

Look at an investment objectively. If you invest and get stopped out, wait for the stock to settle down, and show a few days of positive moves before getting back in.

I am not a financial advisor, but I do always try to limit my risk. When you invest in the stock market you have NO CONTROL over how well the companies or stock do. What you do have control over is when you buy and sell.

I was stopped out of an equity, at a profit, that I fully intend to invest into again this morning. i am not going to rush into re-investing. I am simply going to observe and find an entry point that in my opinion gives me the highest probability of a successful trade.

Where you place stops is critical, but the most critical component is to always minimize your risk......Sometimes that means staying on the sidelines
By SSG, at April 13, 2007 11:48 AM

I use stops now, thanks to the lessons of SIRI and XMSR, but my bigger frustration is the games I feel are being played with these stocks. The merger situation is also a joke. ATT and Bell South can merge and raise my prices, but they are giving SIRI and XMSR extreme grief, I believe just to show the Republicans the Dems are now in charge. That is why I am fed up with all of this.
By Anonymous, at April 13, 2007 12:57 PM